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EXHIBIT 10.1
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CREDIT AGREEMENT
DATED AS OF
DECEMBER 21, 2000
BY AND AMONG
PETROQUEST ENERGY ONE, L.L.C.,
A LOUISIANA LIMITED LIABILITY COMPANY
PETROQUEST ENERGY, INC.,
A LOUISIANA CORPORATION
PETROQUEST ENERGY, INC.,
A DELAWARE CORPORATION
AND
HIBERNIA NATIONAL BANK
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT (the "Agreement") dated as of December 21, 2000,
by and among PETROQUEST ENERGY ONE, L.L.C., a Louisiana limited liability
company ("PEO"), PETROQUEST ENERGY, INC., a Louisiana corporation ( "PE-LA.";
PE-LA. and PEO are herein collectively called the "Borrower"), PETROQUEST
ENERGY, INC., a Delaware corporation (the "Guarantor") and HIBERNIA NATIONAL
BANK, a national banking association (the "Bank").
RECITALS:
1. PE-LA. is a wholly owned subsidiary of the Guarantor, and PE-LA. is
the sole member of PEO.
2. The Borrower has applied to the Bank for a revolving line of credit
in the maximum aggregate principal amount of $50,000,000.00. Proceeds from the
said line of credit, if extended, will be used in part by the Borrower to
refinance the Borrower's existing indebtedness to Compass Bank, an Alabama state
chartered banking institution ("Compass"). In addition, a portion of the
proceeds will be used by PEO to acquire certain oil, gas, and mineral interests
from Mobil Oil Exploration & Producing Southeast, Inc. The remaining proceeds
will be used by Borrower to finance working capital requirements, for direct
investments in their oil and gas operations, and general corporate purposes.
3. The indebtedness of the Borrower to Compass arises under that
certain Credit Agreement dated September 24, 1998, by and among Borrower,
Guarantor, and Compass, as amended by First Amendment to Amended and Restated
Credit Agreement dated April 14, 1999, and as amended by Second Amendment to
Amended and Restated Credit Agreement dated as of June 30, 1999 (as so amended,
the "Compass Loan Agreement").
4. The indebtedness of the Borrower to Compass arising under the
Compass Loan Agreement and the collateral therefor will be assigned or has been
assigned to Bank concurrently with the execution of this Agreement.
5. The Bank, subject to the terms and conditions of this Agreement, has
agreed to extend the revolving line of credit to the Borrower.
NOW, THEREFORE, in consideration of the mutual covenants hereunder set
forth, the Borrower, the Guarantor, and the Bank do hereby amend and restate the
Compass Loan Agreement, and covenant, agree, and obligate themselves as follows:
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ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. DEFINED TERMS. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"AGREEMENT" shall mean this Credit Agreement, as the same may from time
to time be amended, modified, supplemented, or restated and in effect.
"ADVANCE OR ADVANCES" shall mean a Loan or Loans hereunder.
"BANK" shall mean Hibernia National Bank, a national banking
association.
"BASE RATE" shall mean the base rate of interest established from time
to time by The Wall Street Journal, as the "prime" lending rate on
corporate loans posted by at least seventy-five percent (75%) of the
nation's thirty (30) largest banks, and which is not necessarily the
lowest rate charged by the Bank, such rate to be adjusted automatically
on and as of the effective date of any change in such Base Rate.
"BASE RATE INTEREST PERIOD" shall mean, with respect to any Base Rate
Loan, the period ending on the last day of each month, provided,
however, that (i) if any Base Rate Interest Period would end on a day
which is not a Business Day, such Interest Period shall be extended to
the next succeeding Business Day, and (ii) if any Base Rate Interest
Period would otherwise end after the Facility A Termination Date or the
Facility B Termination Date, as the case may be, such Interest Period
shall end on the applicable Termination Date.
"BASE RATE LOANS" shall mean any Loan during any period which bears
interest based upon the Base Rate.
"BORROWER" shall mean individually, interchangeably, and collectively,
PetroQuest Energy, Inc., a Louisiana corporation, and PetroQuest Energy
One, L.L.C., a Louisiana limited liability company, together with their
successors and assigns.
"BORROWING BASE AMOUNT" shall mean at any time the valuation of the
Borrower's Mortgaged Properties, projected oil and gas prices, and any
other factors deemed relevant by the Bank in its sole discretion, all
as evaluated and determined by Bank in its sole discretion on a
semi-annual basis on September 30 and March 31. In addition, the Bank,
in its sole discretion, may conduct (i) one unscheduled Borrowing Base
Amount redetermination subsequent to each semi-annual redetermination,
and (ii) if applicable, the redetermination mentioned in Section 11.17.
hereof. The Borrowing Base Amount also is subject to mandatory
Quarterly Reductions. The initial Borrowing Base Amount,
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based on an effective date of November 30, 2000, is $15,620,000.00. The
Borrowing Base Amount shall never exceed $50,000,000.00.
"BORROWING BASE USAGE" shall mean the quotient of all amounts
outstanding under Facility A plus the face amount of all Letters of
Credit issued by Bank under Facility A divided by the Facility A
Borrowing Base Amount then in effect.
"BRIDGE FACILITY" shall mean that certain loan to Borrower in the
amount not to exceed $10,000,000.00 by EnCap, which loan and all
collateral therefor shall be subordinated in favor of Bank.
"BUSINESS DAY" means a day other than a Saturday, Sunday or legal
holiday for commercial banks under the laws of the State of Louisiana
or a day on which national banks are authorized to be closed in
Lafayette, Louisiana.
"COLLATERAL" shall mean the Mortgaged Properties and any interest in
any kind of property or assets pledged, mortgaged or otherwise subject
to an Encumbrance in favor of the Bank pursuant to the Collateral
Documents.
"COLLATERAL DOCUMENTS" shall collectively refer to the Mortgage, the
Pledge, the Guaranty, and any and all other documents now or hereafter
in which an Encumbrance is created on any property of the Borrower, the
Guarantor, or of any other Person to secure payment of the Indebtedness
of either Borrower or any part thereof.
"COMMITMENT" shall mean the Revolving Loan Commitment.
"COMPASS" shall mean Compass Bank, an Alabama state chartered banking
institution.
"CONSOLIDATED CURRENT ASSETS" shall mean the total of Guarantor's
consolidated current assets, including the amounts available for
borrowing under the Borrowing Base Amount and the Bridge Facility,
determined in accordance with GAAP. Current assets will not include the
effects, if any, of Hedging Agreements pursuant to SFAS No. 133.
"CONSOLIDATED CURRENT LIABILITIES" shall mean the total of Guarantor's
consolidated current liabilities, excluding principal amounts due under
the Revolving Loan Commitment and the Bridge Facility, determined in
accordance with GAAP. Current liabilities will not include the effects,
if any of Hedging Agreements pursuant to SFAS No. 133.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean, at any time, the
shareholder's equity of Guarantor and Borrower on a consolidated basis,
determined in accordance with GAAP, less all unamortized Debt discount
and expense, unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, copyrights and organization
expense.
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"CURRENT RATIO" shall mean the ratio of Consolidated Current Assets to
Consolidated Current Liabilities.
"DEBT" shall mean any and all amounts and/or liabilities owing from
time to time by either Borrower to any Person, including the Bank,
direct or indirect, liquidated or contingent, now existing or hereafter
arising, including without limitation (i) indebtedness for borrowed
money; (ii) the amounts of all standby and commercial letters of credit
and bankers acceptances, matured or unmatured, issued on behalf of
either Borrower and Guarantor; (iii) guaranties of the obligations of
any other Person, whether direct or indirect, whether by agreement to
purchase the indebtedness of any other Person or by agreement for the
furnishing of funds to any other Person through the purchase or lease
of goods, supplies or services (or by way of stock purchase, capital
contribution, advance or loan) for the purpose of paying or discharging
the indebtedness of any other Person, or otherwise; (iv) the present
value of all obligations for the payment of rent or hire of property of
any kind (real or personal) under leases or lease agreements required
to be capitalized under GAAP, and (v) trade payables and operating
leases incurred in the ordinary course of business or otherwise.
"DEFAULT" shall mean an event which with the giving of notice or the
lapse of time (or both) would constitute an Event of Default hereunder.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"ENCAP" shall mean EnCap Energy Capital Fund III, L.P., a Texas limited
partnership, and its successors and assigns.
"ENCUMBRANCES" shall mean individually, collectively and
interchangeably any and all presently existing and/or future mortgages,
liens, privileges, servitudes, rights-of-way and other contractual
and/or statutory security interests and rights of every nature and kind
that, now and/or in the future may affect the property of either
Borrower or the Guarantor or any part or parts thereof.
"ENVIRONMENTAL LAWS" shall mean any federal, state, local or tribal
statute, law, rule, regulation, ordinance, code, permit, consent,
approval, license, written policy or rule of common law now or
hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or
administrative order, injunction, consent decree or judgment, or other
authorization or requirement whenever promulgated, issued or modified,
including the requirement to register underground storage tanks, well
plugging and abandonment requirements, and oil and gas waste disposal
requirements relating to:
(i) emissions, discharges, spills, migration, movement,
releases or threatened releases of pollutants, contaminants, Hazardous
Materials, or hazardous or toxic materials or wastes into or onto soil,
land, ambient air, surface water, ground water, watercourses, publicly
owned treatment works, drains, sewer systems, wetlands or septic
systems;
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(ii) the use, treatment, storage, disposal, handling,
manufacturing, transportation, or shipment of Hazardous Materials or
hazardous and/or toxic wastes, material, products or by-products
containing Hazardous Materials (or of equipment or apparatus containing
Hazardous Materials); or
(iii) otherwise relating to pollution or the protection of
human health or the environment, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, 42 U.S.C. Sections 9601 et seq., as amended, the Resource
Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq., as
amended, the Hazardous Materials Transportation Act, 49 U.S.C. Sections
1801 et seq., as amended, the Clean Water Act, 33 U.S.C. Sections 1251
et seq., as amended, the Toxic Substances Control Act, 15 U.S.C.
Sections 2601 et seq., as amended, the Clean Air Act, 42 U.S.C.
Sections 7401 et seq., as amended, the federal Water Pollution Control
Act, 33 U.S.C. Section 1251 et seq., as amended, the Safe Drinking
Water Act, 42 U.S.C. Sections 300f et seq., as amended, the Atomic
Energy Act, 42 U.S.C. Sections 2011 et seq., as amended, the Natural
Gas Pipeline Safety Act of 1968, 49 U.S.C. Section 1671 et seq., as
amended, the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.C.S. Sections 136 et seq., as amended, and the Occupational Safety
and Health Act, 29 U.S.C. Sections 651 et seq., as amended, and all
comparable statutes of the States of Louisiana and Texas, and all
comparable local Governmental Requirements in such states, and other
environmental, conservation or protection laws in effect in any
jurisdiction where any of the Mortgaged Properties of the Borrower are
located.
"ENVIRONMENTAL LIABILITIES" means with respect to any Person, any and
all liabilities, responsibilities, losses, sums paid in settlement of
claims, obligations, charges, actions (formal or informal), claims
(including, without limitation, claims for personal injury or for
property damage), liens, administrative proceedings, damages
(including, without limitation, loss or damage resulting from the
occurrence of an Event of Default), punitive damages, consequential
damages, treble damages, penalties, fines, monetary sanctions,
interest, court costs, response and remediation costs, stabilization
costs, encapsulation costs, treatment, storage, or disposal costs,
groundwater monitoring or environmental sampling costs, other causes of
action and any other costs and expenses (including, without limitation,
reasonable attorneys', experts', and consultants' fees, costs of
investigation and feasibility studies and disbursements in connection
with any investigative, administrative or judicial proceeding), whether
direct or indirect, known or unknown, absolute or contingent, past,
present or future arising under, pursuant to or in connection with any
Environmental Law, or any other binding obligation of such Person
requiring abatement of pollution or protection of human health and the
environment.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental
Authority for (i) any liability under Environmental Laws or (ii)
damages arising from, or costs incurred by such Governmental Authority
in response to, a Release or threatened Release of a Hazardous
Materials into the environment.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"EURODOLLAR BUSINESS DAY" shall mean any date other than Saturday,
Sunday or a day on which banking institutions are generally authorized
or obligated by law or executive order to close in the City of London,
England.
"EURODOLLAR INTEREST PERIOD" shall mean, with respect to any Eurodollar
Loan (i) initially, the period commencing on the date such Eurodollar
Loan is made and ending one (1), two (2), three (3) or six (6) months
thereafter as selected by the Borrower pursuant to Section 3.1.2., and
thereafter, each period commencing on the day following the last day of
the next preceding Interest Period applicable to such Eurodollar Loan
and ending one (1), two (2), three (3) or six (6) months thereafter, as
selected by the Borrower pursuant to Section 3.1.2., provided, however,
that (a) if any Eurodollar Interest Period would otherwise expire on a
day which is not a Business Day, such Interest Period shall expire on
the next succeeding Business Day unless the result of such extension
would be to extend such Interest Period into the next calendar month,
in which case such Interest Period shall end on the immediately
preceding Business Day, (b) if any Eurodollar Interest Period begins on
the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of
such Interest Period) such Interest Period shall end on the last
Business Day of a calendar month, and (c) any Eurodollar Interest
Period which would otherwise expire after the Facility A Termination
Date shall end on such Termination Date.
"EURODOLLAR LOAN" shall mean any Loan under Facility A during any period
which bears interest at the Eurodollar Rate.
"EURODOLLAR MARGIN" shall mean, with respect to each Eurodollar Loan:
(i) 2.125% per annum whenever the Borrowing Base Usage under
Facility A is greater than or equal to 90%;
(ii) 1.875% per annum whenever the Borrowing Base Usage under
Facility A is greater than or equal to 75% but less than or equal to
90%;
(iii) 1.625% per annum whenever the Borrowing Base Usage under
Facility A is greater than or equal to 50% but less than 75%; or
(iv) 1.375% per annum whenever the Borrowing Base Usage under
Facility A is less than 50%.
"EURODOLLAR RATE" shall mean with respect to any Eurodollar Interest
Period, the offered rate for U.S. Dollar deposits of not less than
$1,000,000 as of 11:00 A.M. City of London, England time two (2)
Eurodollar Business Days prior to the first date of each Eurodollar
Interest Period as shown on the display designated as "British Bankers
Assoc.
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Interest Settlement Rates" on the Telerate system ("Telerate"), Page
3750 or Page 3740, or such other page or pages as may replace such
pages on Telerate for the purpose of displaying such rate, rounded
upwards, if necessary to the nearest 1/16% and adjusted for the maximum
cost of reserves, if any. Provided, however, that if such rate is not
available on Telerate then such offered rate shall be otherwise
independently obtained by Bank from an alternate, substantially similar
independent source available to Bank or shall be calculated by Bank by
substantially similar methodology as that theretofore used to determine
such offered rate in Telerate.
"EVENT OF DEFAULT" shall mean individually, collectively and
interchangeably any of the Events of Default set forth below in Section
13.1. hereof.
"FACILITY A" shall mean a three (3) year reducing revolving line of
credit to the Borrower under the Revolving Loan Commitment, subject at
all times to the Facility A Borrowing Base Amount then in effect.
"FACILITY A BORROWING BASE AMOUNT" shall mean the Borrowing Base Amount
in effect from time to time less, at all times prior to the Facility B
Termination Date and the payment in full of all obligations of Borrower
to Bank under Facility B, $1,500,000.00. The initial Facility A
Borrowing Base Amount is $14,120,000.00
"FACILITY A TERMINATION DATE" shall mean the earlier to occur of (i)
December 31, 2003 or (ii) the date of termination of the Commitment
pursuant to Article XIII hereof.
"FACILITY B" shall mean a one (1) year revolving line of credit to the
Borrower under the Revolving Loan Commitment. The maximum aggregate
principal amount of all Advances under Facility B shall never exceed
$1,500,000.00.
"FACILITY B TERMINATION DATE" shall mean the earlier to occur of (i)
December 31, 2001 or (ii) the date of termination of the Commitment
pursuant to Article XIII hereof.
"GAAP" shall mean, at any time, accounting principles generally
accepted in the United States as then in effect.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state
or other political subdivision thereof, or entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GOVERNMENTAL REQUIREMENT" shall mean any applicable state, federal or
local law, statute, ordinance, code, rule, regulation, order or decree.
"GUARANTOR" shall mean individually, interchangeably, and collectively,
PetroQuest Energy, Inc., a Delaware corporation, and its successors and
assigns.
"GUARANTY" shall mean, collectively, that certain Commercial Guaranty
of even date with this Agreement by Guarantor in favor of the Bank.
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"HEDGING AGREEMENT" means (a) any interest rate or currency swap, rate
cap, rate floor, rate collar, forward agreement, or other exchange or
rate protection agreement or any option with respect to any such
transaction and (b) any swap agreement, cap, floor, collar, exchange
transaction, forward agreement, or other exchange or protection
agreement relating to Hydrocarbons or any option with respect to any
such transaction.
"HAZARDOUS MATERIALS" means (1) hazardous materials, hazardous wastes,
and hazardous substances including, but not limited to, those
substances, materials and wastes listed in the United States Department
of Transportation Hazardous Materials Table, 49 C.F.R. Section 172.101,
as amended, or listed by the federal Environmental Protection Agency as
hazardous substances under or pursuant to 40 C.F.R. Part 302, as
amended, or substances, materials, contaminants or wastes which are or
become regulated under any Environmental Law, including without
limitation, those substances, materials, contaminants or wastes as
defined in the following statutes and their implementing regulations:
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq., as amended, the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., as amended, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et
seq., as amended, the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq., as amended, the Clean Air Act, 42 U.S.C. Section 7401 et
seq., as amended, the federal Water Pollution Control Act, 33 U.S.C.
Section 1251 et seq., as amended, the Occupational Safety and Health
Act, 2 U.S.C. Section 651 et seq., as amended, the Safe Drinking Water
Act, 42 U.S.C. Section 300f et seq., as amended and the Natural Gas
Pipeline Safety Act of 1968, 49 U.S.C. Section 1671 et seq., as
amended; (2) all substances, materials, contaminants or wastes listed
in all comparable statutes of the States of Louisiana and Texas and in
comparable local Requirements of Law in such states; (3) acid gas, sour
water streams or sour water vapor streams containing hydrogen sulfide
or other forms of sulphur, sodium hydrosulfide and ammonia; (4)
Hydrocarbons; (5) natural gas, synthetic gas, and any mixtures thereof;
(6) asbestos and/or any material which contains 1% or more, by weight,
of any hydrated mineral silicate, including but not limited to
chrysotile, amosite, crocidolite, tremolite, anthophylite and/or
actinolite, whether friable or non-friable; (7) PCB's, or PCB
containing materials or fluids; (8) radon; (9) naturally occurring
radioactive material, radioactive substances or waste; (10) salt water
and other oil and gas wastes and (11) any other hazardous or noxious
substance, material, pollutant, emission, or solid, liquid or gaseous
waste.
"HYDROCARBONS" means oil, gas, casinghead gas, condensate, distillate,
liquid hydrocarbons, gaseous hydrocarbons and all products separated,
settled and dehydrated therefrom and all products refined therefrom,
including, without limitation, kerosene, liquefied petroleum gas,
refined lubricating oils, diesel fuel, drip gasoline, natural gasoline,
helium, sulphur and all other materials.
"INDEBTEDNESS" shall mean, at any time, the indebtedness of the
Borrower evidenced by the Note executed by the Borrower pursuant to
this Agreement, in principal, interest, costs, expenses and reasonable
attorneys' fees and all other fees and charges, together
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with all commitment fees and other indebtedness and costs and expenses
for which the Borrower is responsible under this Agreement or under any
of the Related Documents. In addition, the word "Indebtedness" also
includes, any and all other loans, extensions of credit, obligations,
debts and liabilities of the Borrower (or any one or more of them),
plus interest thereon, that may now and in the future be owed to or
incurred in favor of the Bank, as well as all claims by the Bank
against the Borrower (or any one or more of them), whether existing now
or later; whether they are voluntary or involuntary, due or to become
due, direct or indirect or by way of assignment, determined or
undetermined, absolute or contingent, liquidated or unliquidated;
whether the Borrower (or any one or more of them) may be liable
individually or jointly with others, of every nature and kind
whatsoever, in principal, interest, costs, expenses and reasonable
attorneys' fees and all other fees and charges; whether the Borrower
(or any one or more of them) may be obligated as principal obligor,
guarantor, surety, accommodation party or otherwise.
"INTEREST PAYMENT DATE" shall mean (i) for a Base Rate Loan, the last
Business Day of each month such Loan is outstanding beginning January
31, 2001 and (ii) for a Eurodollar Loan, the last Eurodollar Business
Day of each Eurodollar Interest Period for such Loan, and during any
Eurodollar Interest Period of six (6) months, the Eurodollar Business
Day occurring three (3) months after the commencement of such Interest
Period.
"INTEREST PERIOD" shall mean any Base Rate Interest Period or
Eurodollar Interest Period.
"LEASES" shall mean all present and future oil, gas and mineral leases
or interests therein now owned or hereafter acquired by the Borrower
that form part of the Mortgaged Properties.
"LETTERS OF CREDIT" shall mean the letters of credit issued by Bank
pursuant to Section 2.3.2. hereof.
"LOANS" shall mean, collectively, the Revolving Loans under Facility A
and Facility B.
"LOAN DOCUMENTS" shall mean this Agreement, the Note, the Collateral
Documents and any other Related Documents.
"MATERIAL ADVERSE CHANGE" shall mean, with respect to the Borrower or
the Guarantor, an event which causes a material adverse effect on the
business, assets, operations or condition (financial or otherwise) of
such Person, or which otherwise changes in a materially adverse way any
other facts, circumstances or conditions which the Bank has relied upon
or utilized in making its Commitment hereunder.
"MORTGAGE" shall mean those certain (i) mortgages, security agreements,
and/or deeds of trust by either Borrower in favor of Compass and/or
Comerica Bank-Texas, as restated in favor of Bank pursuant to
restatements of even date herewith, (ii) Mortgage, Assignment of
Production, Security Agreement, and Financing Statement by either
Borrower in favor of the Bank dated of even date herewith, and (iii)
Deed of Trust, Security Agreement, Financing Statement and Assignment
of Production by either Borrower in favor of the
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Bank dated of even date herewith, as any of the same may be amended,
supplemented, and/or restated from time to time and in effect.
"MORTGAGED PROPERTIES" shall mean the property and interests of the
Borrower encumbered by the Mortgage.
"NOTE" shall mean the Revolving Note as said promissory note may be
renewed or extended, together with all other promissory note or notes
given in renewal, substitution, or as a refinancing of any part of the
indebtedness evidenced thereby.
"PERMITTED ENCUMBRANCES" shall have the meaning ascribed to such term
in Section 12.4. hereof.
"PERSON" shall mean an individual or a corporation, partnership, trust,
joint venture, incorporated or unincorporated association, joint stock
company, government, or an agency or political subdivision thereof, or
other entity of any kind.
"PLEDGE" shall mean that certain Pledge Agreement to be executed by
PE-LA.and Guarantor in favor of Bank contemporaneously herewith,
affecting all outstanding membership interests of PE-LA. in and to PEO,
and all membership interests owned now or in the future by Guarantor in
PEO, such Pledge to be given as a restatement of an existing pledge
agreement heretofore held by Compass, as the same may be amended,
supplemented, and/or restated from time to time and in effect.
"QUARTERLY REDUCTION" shall mean each reduction to the Borrowing Base
Amount established by the Bank based on each scheduled and unscheduled
redetermination of the Borrowing Base Amount. The initial Quarterly
Reduction will be $1,320,000.00 effective March 31, 2001.
"RELATED DOCUMENTS" shall mean and include individually, collectively,
interchangeably and without limitation all promissory notes, credit
agreements, loan agreements, guaranties, security agreements,
mortgages, collateral mortgages, deeds of trust, and all other
instruments and documents, whether now or hereafter existing, executed
in connection with the Indebtedness.
"RELEASE" means any release, spill, emission, leak, injection, deposit,
disposal, discharge, dispersal, leaching or migration of any Hazardous
Materials into the environment or into or out of any real property of
Borrower, including the movement of Hazardous Materials through or in
the air, soil, surface water, groundwater and/or land which could
reasonably be expected to form the basis of an Environmental Liability
against Borrower.
"REMEDIAL ACTION" means any action to (i) clean up, remove, treat or in
any other way address Hazardous Materials in the environment, (ii)
prevent the Release or threat of Release or minimize the further
Release of Hazardous Materials so they do not mitigate or endanger or
threaten to endanger public health or welfare or the environment or
(iii) perform pre-remedial studies and investigations and post-remedial
monitoring and care.
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"REQUEST FOR ADVANCE" shall mean the Borrower's request for a Revolving
Loan.
"REVOLVING LOANS" shall mean loans made by the Bank under the Revolving
Note to the Borrower in accordance with and subject to the terms of the
Revolving Loan Commitment.
"REVOLVING LOAN COMMITMENT" shall mean the agreement by the Bank to the
Borrower to make Revolving Loans in accordance with the provisions of
Article II hereof. The Revolving Loan Commitment, shall never exceed
the Borrowing Base Amount in effect from time to time and such amount
shall be in Bank's sole discretion.
"REVOLVING NOTE" shall mean that certain promissory note of even date
herewith, by Borrower in the maximum aggregate principal amount of
$50,000,000.00 payable to the order of the Bank, together with any and
all extensions, renewals, modifications, and substitutions therefor.
"SHIP SHOAL INTERESTS" shall mean the oil, gas, and mineral interests
to be acquired by PEO from Mobil Oil Exploration & Producing Southeast,
Inc. pursuant to that certain Purchase and Sale Agreement dated
September 1, 2000, as amended.
"SOLVENT" shall mean, when used with respect to any Person on a
particular day, that on such date (i) the fair value of the property of
such Person is greater than the total amount of liabilities, including
without limitation, contingent liabilities, of such person, (ii) the
present fair salable value of the assets of such person is not less
than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured, (iii)
such Person is able to realize upon its assets and pay its debts and
other liabilities, contingent obligations and other commitments as they
mature in the ordinary course of business, (iv) such Person does not
intend to, and does not believe that it will, incur debts and
liabilities beyond such Person's ability to pay as such debts and
liabilities mature, and (v) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction,
for which such Person's property would constitute unreasonably small
capital after giving due consideration to the prevailing practice in
the industry in which such person is engaged. In computing the amount
of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount which, in light of all of
the facts and circumstances existing at such time, represents the
amount that can be reasonably expected to become an actual or matured
liability.
"SUBSIDIARIES" shall mean at any date with respect to any Person all
the corporations of which such Person at such date, directly or
indirectly, owns 50% or more of the outstanding capital stock
(excluding directors' qualifying shares), and "SUBSIDIARY" means any
one of the Subsidiaries.
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"TANGIBLE NET WORTH" shall mean, at any time, the Guarantor's
consolidated total assets excluding intangible assets (i.e., patents,
copyrights, trademarks, trade names, franchises, goodwill,
organizational expenses, and similar intangible expenses, but including
leaseholds and leasehold improvements), less the consolidated total
liabilities of the Guarantor, all as determined in accordance with
GAAP.
"TRANCHE" shall mean a Eurodollar Loan for a particular Interest Period
and/or a Base Rate Loan.
"UCC" shall mean the Uniform Commercial Code, Commercial Laws-Secured
Transactions (La. R.S. 10-9-101 et seq.) in the State of Louisiana, as
amended from time to time, provided that if by reason of mandatory
provisions of law, the perfection or effect of perfection or
non-perfection of the Bank's Encumbrances against the Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction
other than the State of Louisiana, then "UCC" means the Uniform
Commercial Code as the same may be amended from time to time and in
effect in such other jurisdiction.
SECTION 1.2. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data submitted pursuant to this Agreement shall be prepared in accordance with
GAAP.
ARTICLE II
REVOLVING LOANS
SECTION 2.1. THE REVOLVING LOAN COMMITMENT. Subject to the terms and
conditions of this Agreement, the Bank agrees (a) to extend credit to the
Borrower during the period from the date hereof until the Facility A Termination
Date, by making Revolving Loans under Facility A to the Borrower from time to
time, provided, however, that at no time shall the sum of the aggregate
principal amount of such Revolving Loans to the Borrower made under Facility A
at such time outstanding exceed the Facility A Borrowing Base Amount then in
effect, and (b) to extend credit to the Borrower during the period from the date
hereof until the Facility B Termination Date, by making Revolving Loans under
Facility B to the Borrower from time to time, provided, however, that at no time
shall the aggregate principal amount of such Revolving Loans made under Facility
B exceed $1,500,000.00.
SECTION 2.2. THE BORROWING BASE AMOUNT. The initial Borrowing Base
Amount is hereby fixed at $15,620,000.00, and the initial Facility A Borrowing
Base Amount is hereby fixed at $14,120,000.00. It is agreed and understood that
the Bank will re-evaluate and re-establish the Borrowing Base Amount on a
semi-annual basis on each September 30 and March 31. The Borrowing Base Amount
also is subject, in Bank's sole discretion, to one (1) unscheduled
redetermination of the Borrowing Base Amount after each scheduled semi-annual
redetermination by
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Bank. The Borrower, at its option, also may request one (1) unscheduled
Borrowing Base Amount redetermination after each scheduled semi-annual
redetermination by Bank. The parties agree and understand that the Borrowing
Base Amount is further subject to Quarterly Reductions.
SECTION 2.3. REVOLVING LOANS.
SECTION 2.3.1. REVOLVING LOANS. Subject to the terms and conditions of
this Agreement, the Bank agrees to make Revolving Loans under Facility A and
Facility B to the Borrower from time to time. Within the limits set forth
herein, the Borrower may borrow from the Bank hereunder, repay any and all such
Revolving Loans as hereinafter provided and reborrow hereunder; provided,
however, each Revolving Loan shall be in an amount not less than $50,000.00. The
Borrower's obligation to repay the Revolving Loans (under both Facility A and
Facility B) made by the Bank shall be evidenced by the Revolving Note. Revolving
Loans under Facility B shall be Base Rate Loans and shall bear interest at the
Base Rate plus 0.50%. Revolving Loans under Facility A shall bear interest, at
Borrower's option, at the Base Rate or the Eurodollar Rate plus the Eurodollar
Margin. The total number of Tranches under the Revolving Loan Commitment which
may be outstanding at any time hereunder shall never exceed four (4) Tranches,
whether such Tranches are Base Rate Loans, Eurodollar Loans, or a combination
thereof.
SECTION 2.3.2. LETTERS OF CREDIT. On the terms and conditions
hereinafter set forth, the Bank shall from time to time during the period
beginning on the date of this Agreement and ending on the Facility A Termination
Date upon request of Borrower or either of them issue standby letters of credit
for the account of the requesting Borrower for general corporate purposes in
such amounts as the requesting Borrower may request but not to exceed in the
aggregate face amount at any time outstanding the sum of $7,500,000.00 (subject
to the additional limitations on the amounts thereof set forth in Section 2.3.3.
below), each such letter of credit shall have an expiry date no later than the
earlier of one (1) year from the date of issuance or the Facility A Termination
Date, whichever occurs first (the "Letters of Credit"). On each day during the
period while any such Letter of Credit is issued and outstanding in accordance
with the provisions of this Agreement, the sum of the face amount of each such
outstanding Letter of Credit shall be treated as an Advance under Facility A.
Borrower hereby unconditionally agrees to pay and reimburse the Bank for the
amount of each payment under any Letter of Credit that is in substantial
compliance with the provisions of such Letter of Credit at or prior to the date
on which payment is made by the Bank to the beneficiary thereunder, without
presentment, demand, protest or other formalities of any kind. Upon receipt from
any beneficiary of any Letter of Credit of any demand for payment under such
Letter of Credit, the Bank shall promptly notify Borrower of the demand and the
date upon which such payment is to be made by the Bank to such beneficiary in
respect of such demand. Forthwith upon receipt of such notice from the Bank,
Borrower shall advise the Bank whether or not it intends to borrow under
Facility A to finance its obligations to reimburse the Bank, and if so, submit a
Request for Advance as provided in Section 2.3.4. hereof.
SECTION 2.3.3. PROCEDURE FOR OBTAINING LETTERS OF CREDIT. The amount
and date of issuance, renewal, extension or reissuance of a Letter of Credit
pursuant to the Bank's commitment above in Section 2.3.2. shall be designated by
the requesting Borrower's written request delivered to Bank at least three (3)
Business Days prior to the date of such issuance,
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renewal, extension or reissuance. Concurrently with or promptly following the
delivery of the request for a Letter of Credit, the requesting Borrower shall
execute and deliver to the Bank an application and agreement with respect to the
Letter of Credit, said application and agreement to be in the form customarily
used by the Bank. The Bank shall not be obligated to issue, renew, extend or
reissue such Letters of Credit if (i) the Bank does not approve the requested
form of the Letter of Credit or any of the terms thereof in its sole discretion,
(ii) the amount thereon when added to the amount of the outstanding Letters of
Credit exceeds $7,500,000.00, or (iii) the amount thereof when added to the
total outstanding Advances under Facility A would exceed the Facility A
Borrowing Base Amount then in effect.
SECTION 2.3.4. MANNER AND NOTICE OF BORROWING UNDER THE REVOLVING LOAN
COMMITMENT. Requests For Advances under the Revolving Loan Commitment may be
made by the Borrower, in writing (including facsimile transmission) to the Bank
and such requests shall be fully authorized by the Borrower if made by any one
of the persons designated by the Borrower in writing to the Bank. The form of
Request for Advance is attached hereto as Exhibit "B". The Bank shall have the
right, but not the obligation, to verify any telephone requests by calling the
person who made the request at the telephone number designated by the Borrower
in writing to the Bank. Requests For Advances must be received by not later than
11:00 a.m. (Central Time) on the date of the proposed advance. Each Request for
Advance for a Revolving Loan under Facility A must specify whether such Loan is
a Eurodollar Loan or a Base Rate Loan and the applicable Tranche. Not later than
the close of business on the date of such request, assuming all conditions of
this Agreement for such advance has been satisfied, the Bank will make such
advance. The amount thereof shall be credited by the Bank to the checking
account maintained in the name of the Borrower with the Bank and the credit
advice resulting therefrom shall be mailed to the Borrower. The Bank's copy of
such credit advice indicating such deposit to the account of the Borrower shall
be deemed conclusive evidence of the Borrower's indebtedness to the Bank in
connection with such borrowing. The aggregate outstanding amount of principal
and interest due by the Borrower at any given time under the Revolving Loan
Commitment shall be and constitute the indebtedness of the Borrower to the Bank
under the Revolving Note made by the Borrower. When each advance is made by the
Bank to the Borrower hereunder, the Borrower shall be deemed to have renewed and
reissued its Revolving Note for the amount of the advance plus all amounts due
by the Borrower to the Bank under the Revolving Loan Commitment immediately
prior to such advance.
SECTION 2.3.5. PAYMENT OF THE REVOLVING NOTE UNDER THE REVOLVING LOAN
COMMITMENT. Subject to the requirements of Article VII below, interest on the
unpaid principal balance of the Revolving Note shall be payable on each Interest
Payment Date and, for Advances under Facility B, on the Facility B Termination
Date, and for Advances under Facility A, on the Facility A Termination Date.
Subject to the requirements of Article VII below, (i) the outstanding principal
due under the Revolving Note resulting from Advances under Facility A shall be
due and payable on the Facility A Termination Date, and (ii) the outstanding
principal due under the Revolving Note resulting from Advances under Facility B
shall be due and payable on the Facility B Termination Date.
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SECTION 2.3.6. USE OF PROCEEDS. The Borrower shall use the proceeds of
the Revolving Loan Commitment as set forth in Recital 2 of this Agreement.
ARTICLE III
INTEREST RATES
SECTION 3.1. OPTIONS.
SECTION 3.1.1. BASE RATE LOANS. On Base Rate Loans, Borrower agrees to
pay interest calculated on the basis of a year consisting of 360 days with
respect to the unpaid principal amount of each Base Rate Loan from the date the
proceeds thereof are made available to Borrower until maturity (whether by
acceleration or otherwise), at a varying rate per annum equal to (i) for
Facility A Advances, the Base Rate; and (ii) for Facility B Advances, the Base
Rate plus 0.50%. Past due principal, to the extent permitted by law, shall bear
interest, payable upon demand, at the default rate specified in the Revolving
Note.
SECTION 3.1.2. EURODOLLAR LOANS. On Eurodollar Loans, Borrower agrees
to pay interest calculated on the basis of a year consisting of 360 days with
respect to the unpaid principal amount of each Eurodollar Loan from the date the
proceeds thereof are made available to Borrower until maturity (whether by
acceleration or otherwise), at a varying rate per annum equal to the Eurodollar
Rate plus the Eurodollar Margin. Past due principal, to the extent permitted by
law, shall bear interest, payable on demand, at the default rate specified in
the Revolving Note. Upon three (3) Business Days written notice prior to the
making by the Bank of any Eurodollar Loan (in the case of the initial Interest
Period therefor) or the expiration date of each succeeding Interest Period (in
the case of subsequent Interest Periods therefor), Borrower shall have the
option, subject to compliance by Borrower with all of the provisions of this
Agreement, as long as no Event of Default exists, to specify whether the
Interest Period commencing on any such date shall be a one (1), two (2), three
(3) or six (6) month period. If Agent shall not have received timely notice of a
designation of such Interest Period as herein provided, Borrower shall be deemed
to have elected to convert all maturing Eurodollar Loans to Base Rate Loans.
SECTION 3.2. INTEREST RATE DETERMINATION. The Bank shall determine each
interest rate applicable to any Base Rate Loan or Eurodollar Loan and its
determination shall be conclusive absent manifest error. The Bank shall notify
the Borrower and the Banks of each interest rate determination within a
reasonable time after each such determination.
SECTION 3.3. CONVERSION OPTION. Borrower may elect from time to time
(i) to convert all or any part of its Eurodollar Loans to Base Rate Loans by
giving Bank irrevocable notice of such election in writing prior to 10:00 a.m.
(Lafayette, Louisiana time) on the conversion date and such conversion shall be
made on the requested conversion date, provided that any such conversion of
Eurodollar Loan shall only be made on the last day of the Eurodollar Interest
Period with respect thereof, and (ii) to convert all or any part of its Base
Rate Loans to Eurodollar Loans by giving the Bank irrevocable written notice of
such election three (3) Business Days prior to the proposed conversion and such
conversion shall be made on the
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requested conversion date or, if such requested conversion date is not a
Business Day on the next succeeding Business Day. Any such conversion shall not
be deemed to be a prepayment of any of the Loans for purposes of this Agreement
on the Revolving Note. NOTWITHSTANDING THE FOREGOING, BORROWER CANNOT CONVERT
BASE RATE LOANS UNDER FACILITY B TO EURODOLLAR LOANS.
ARTICLE IV
CHANGE OF CIRCUMSTANCES
SECTION 4.1. UNAVAILABILITY OF FUNDS OR INADEQUACY OF PRICING. In the
event that, in connection with any proposed Eurodollar Loan, the Bank
determines, which determination shall, absent manifest error, be final,
conclusive and binding upon all parties, due to changes in circumstances since
the date hereof, adequate and fair means do not exist for determining the
Eurodollar Rate or such rate will not accurately reflect the costs to the Bank
of funding Eurodollar Loans for such Eurodollar Interest Period, the Bank shall
give notice of such determination to the Borrower, whereupon, until the Bank
notifies the Borrower that the circumstances giving rise to such suspension no
longer exist, the obligation of the Bank to make, continue or convert Loans into
Eurodollar Loans shall be suspended, and all loans to Borrower shall be Base
Rate Loans during the period of suspension
SECTION 4.2. CHANGE IN LAWS. If at any time any new law or any change
in existing laws or in the interpretation of any new or existing laws shall make
it unlawful for Bank to make or continue to maintain or fund Eurodollar Loans
hereunder, then Bank shall promptly notify Borrower in writing Bank's obligation
to make, continue or convert Loans into Eurodollar Loans under this Agreement
shall be suspended until it is no longer unlawful for Bank to make or maintain
Eurodollar Loans. Upon receipt of such notice, Borrower shall either repay the
outstanding Eurodollar Loans owed to the Bank, without penalty, on the last day
of the current Interest Periods (or, if Bank may not lawfully continue to
maintain and fund such Eurodollar Loans, immediately), or Borrower may convert
such Eurodollar Loans at such appropriate time to Base Rate Loans.
SECTION 4.3. INCREASED COST OR REDUCED RETURN.
(i) If, after the date hereof, the adoption of any
applicable law, rule, or regulation, or any change in any applicable law, rule,
or regulation, or any change in the interpretation or administration thereof by
any governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank with any request
or directive (whether or not having the force of law) of any such governmental
authority, central bank, or comparable agency:
(A) shall subject Bank to any tax, duty, or other charge
with respect to any Eurodollar Loans, the Revolving Note, or
its obligation to make Eurodollar Loans, or change the basis
of taxation of any amounts payable to Bank under this
Agreement, or the Revolving Note, in respect
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of any Eurodollar Loans (other than franchise taxes and
taxes imposed on the overall net income of Bank);
(B) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement
(other than reserve requirements, if any, taken into account
in the determination of the Eurodollar Rate) relating to any
extensions of credit or other assets of, or any deposits
with or other liabilities or commitments of, Bank, including
the Commitment of Bank hereunder; or
(C) shall impose on Bank or on the London interbank
market any other condition affecting this Agreement or the
Revolving Note or any of such extensions of credit or
liabilities or commitments;
and the result of any of the foregoing is to increase the cost to Bank of
making, converting into, continuing, or maintaining any Eurodollar Loans or to
reduce any sum received or receivable by Bank under this Agreement or the
Revolving Note with respect to any Eurodollar Loans, then Borrower shall pay to
Bank on demand such amount or amounts as will compensate such Bank for such
increased cost or reduction. If Bank requests compensation by Borrower under
this Section 4.3., Borrower may, by notice to Bank, suspend the obligation of
Bank to make or continue Eurodollar Loans, or to convert all or part of the Base
Rate Loan owing to Bank to Eurodollar Loans, until the event or condition giving
rise to such request ceases to be in effect (in which case the provisions of
Section 4.3. shall be applicable); provided that such suspension shall not
affect the right of Bank to receive the compensation so requested.
(ii) If, after the date hereof, Bank shall have determined
that the adoption of any applicable law, rule, or regulation regarding capital
adequacy or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the capital of Bank or
any corporation controlling Bank as a consequence of Bank's obligations
hereunder to a level below that which Bank or such corporation could have
achieved but for such adoption, change, request, or directive (taking into
consideration its policies with respect to capital adequacy), then from time to
time upon demand Borrower shall pay to Bank such additional amount or amounts as
will compensate Bank for such reduction.
(iii) Bank shall promptly notify Borrower of any event of
which it has knowledge, occurring after the date hereof, which will entitle such
Bank to compensation pursuant to this Section 4.3. will designate a separate
lending office, if applicable, if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the judgment of Bank,
be otherwise disadvantageous to it. If Bank claims compensation under this
Section 4.3., Bank shall furnish to Borrower a statement setting forth the
additional amount
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or amounts to be paid to it hereunder which shall be conclusive in the absence
of manifest error. In determining such amount, Bank may use any reasonable
averaging and attribution methods.
(iv) If Bank gives notice to the Borrower pursuant to
Section 4.3., Bank shall give to the Borrower a statement signed by an officer
of such Bank setting forth in reasonable detail the basis for, and the
calculation of such additional cost, reduced payments or capital requirements,
as the case may be, and the additional amounts required to compensate Bank
therefor.
(v) Within five (5) Business Days after receipt by the
Borrower of any notice referred to in Section 4.3., the Borrower shall pay to
the Bank such additional amounts as are required to compensate Bank for the
increased cost, reduce payments or increase capital requirements identified
therein, as the case may be; provided, that the Borrower shall not be obligated
to compensate Bank for any increased costs, reduced payments or increased
capital requirements to the extent that Bank incurs the same prior to a date six
(6) months before Bank gives the required notice.
SECTION 4.4. BREAKAGE FEES. Without duplication under any other
provision hereof, if Bank incurs any loss, cost or expense (including, without
limitation, any loss of profit and loss, cost, expense or premium reasonably
incurred by reason of the liquidation or re-employment of deposits or other
funds acquired by Bank to fund or maintain any Eurodollar Loan or the relending
or reinvesting of such deposits or amounts paid or prepaid to the Bank as a
result of any of the following events other than any such occurrence as a result
in the change of circumstances described in Sections 4.1. and 4.2.:
(i) any payment, prepayment or conversion of a
Eurodollar Loan on a date other than the last day of its
Eurodollar Interest Period (whether by acceleration,
prepayment or otherwise);
(ii) any failure to make a principal payment of a
Eurodollar Loan on the due date thereof; or
(iii) any failure by the Borrower to borrow,
continue, prepay or convert to a Eurodollar Loan on the dates
specified in a notice given pursuant to this Agreement.
then the Borrower shall pay to Bank such amount as will reimburse Bank for such
loss, cost or expense. If Bank makes such a claim for compensation, it shall
furnish to Borrower a statement setting forth the amount of such loss, cost or
expense in reasonable detail (including an explanation of the basis for and the
computation of such loss, cost or expense) and the amounts shown on such
statement shall be conclusive and binding absent manifest error
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ARTICLE V
FEES
SECTION 5.1. FACILITY A FACILITY FEE. The Borrower shall pay to the
Bank a facility fee in the amount equal to 0.50% of the initial Borrowing Base
Amount, payable upon execution of this Agreement by the Borrower. An additional
facility fee of one-half percent (.50%) of the incremental amount of any
increase to the Facility A Borrowing Base Amount shall be owed by Borrower to
Bank, and such fee shall be payable by Borrower upon its acceptance of said
increase; provided, however, if the Facility A Borrowing Base Amount is reduced
and then reinstated to a higher amount, the additional facility fee will be
applicable only to the incremental amount, if any by which the higher amount
exceeds the previous Highest Facility A Borrowing Base Amount. The Borrower
hereby authorizes the Bank to debit its account maintained with the Bank for
collection of the facility fee.
SECTION 5.2. FACILITY A UNUSED FEE. The Borrower shall pay the Bank an
unused fee calculated as follows: (i) if the Borrowing Base Usage is greater
than or equal to 90%, the unused fee is 0.50%; (ii) if the Borrowing Base Usage
is greater than or equal to 75% but less than 90%, the unused fee is 0.50%;
(iii) if the Borrowing Base Usage is greater than or equal to 50% but less than
75%, the unused fee is 0.375%; and (iv) if the Borrowing Base Usage is less than
50%, the unused fee is 0.375%. The unused fee will be payable quarterly in
arrears, commencing March 31, 2001. The unused portion of the Facility A
Borrowing Base Amount shall be determined on a daily basis by subtracting from
Facility A Borrowing Base Amount the amount of all Facility A Revolving Loans
outstanding, and by averaging said daily amounts for the period for which the
fee is to be determined. The Borrower hereby authorizes the Bank to debit its
account maintained with the Bank for collection of the unused fee.
SECTION 5.3. FACILITY B COMMITMENT FEE. The Borrower shall pay to Bank
a commitment fee of 0.50% of $1,500,000.00, payable upon execution of this
Agreement. The Borrower hereby authorizes Bank to debit its account maintained
with Bank for collection of the fee.
SECTION 5.4. LETTER OF CREDIT FEE. The Borrower shall pay to Bank a fee
for each Letter of Credit, in the amount equal to 2% per annum of the face
amount of each Letter of Credit. The fee shall be payable by Borrower to Bank
upon Bank's issuance (or renewal, extension, or reissuance, as the case may be)
of a Letter of Credit. The Borrower hereby authorizes the Bank to debit its
account maintained with the Bank for collection of the fee.
SECTION 5.5. ENGINEERING FEE. The Borrower shall pay to the Bank a fee
of $7,500.00 for each unscheduled determination of the Borrowing Base Amount
requested by Borrower. The Borrower hereby authorizes the Bank to debit its
account maintained with the Bank for collection of the fee.
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ARTICLE VI
CERTAIN GENERAL PROVISIONS
SECTION 6.1. PAYMENTS TO THE BANK. All payments of principal, interest,
fees and any other amounts due hereunder or under any of the other Related
Documents shall be made to the Bank at the Bank's office in New Orleans,
Louisiana at 313 Carondelet Street, New Orleans, Louisiana 70130, or at such
other location that the Bank may from time to time designate in writing to the
Borrower, in each case in immediately available funds.
SECTION 6.2. NO OFFSET, ETC. All payments by the Borrower hereunder and
under any of the other Related Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any taxes, levies,
imposts, duties, charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied by
any jurisdiction or any political subdivision thereof or taxing or other
authority therein unless the Borrower is compelled by law to make such deduction
or withholding. If any such obligation is imposed upon the Borrower with respect
to any amount payable by it hereunder or under any of the other Loan Documents,
the Borrower will pay to the Bank, on the date on which such amount is due and
payable hereunder or under such other Related Document, such additional amount
in Dollars as shall be necessary to enable the Bank to receive the same net
amount which the Bank would have received on such due date had no such
obligation been imposed upon the Borrower. The Borrower will deliver promptly to
the Bank certificates or other valid vouchers for all taxes or other charges
deducted from or paid with respect to payments made by the Borrower hereunder or
under such other Loan Documents.
ARTICLE VII
PREPAYMENTS
SECTION 7.1. VOLUNTARY PREPAYMENTS. Borrower may at any time and from
time to time, without premium or penalty, prepay Base Rate Loans. Subject to
availability under the Facility A Borrowing Base Amount, Borrower also is
entitled to prepay at any time, without premium or penalty, outstanding
indebtedness under Facility B with proceeds from an Advance under Facility A.
Borrower may at any time and from time to time, without penalty or premium
except as required pursuant to Section 4.4. hereof, prepay Eurodollar Loans
outstanding under Facility A upon at least three (3) Business Day's notice to
Bank.
SECTION 7.2. MANDATORY PREPAYMENT RESULTING FROM A QUARTERLY REDUCTION.
Subject to Section 4.4 above, in the event the outstanding principal amount of
all Loans under Facility A exceed, as a result of a Quarterly Reduction, the
Facility A Borrowing Base Amount then in effect, the Borrower shall make (on the
first Business Day of the month following the
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Quarterly Reduction) a mandatory prepayment to Bank of the excess amount and
accrued, unpaid interest (through the date of payment) on such excess amount.
SECTION 7.3. MANDATORY PREPAYMENT RESULTING FROM OVERADVANCES. In the
event the unpaid principal amount of the Revolving Loans ever exceeds the
Borrowing Base Amount then in effect, the Borrower agrees, within thirty (30)
days of the occurrence of such an excess amount (an "overadvance") to do the
following: (a) make a lump sum payment to Bank in an amount equal to the
overadvance; (b) grant to the Bank security interests or mortgage liens on new
collateral in an amount necessary, in Bank's sole discretion, to cure the
overadvance (and effectuate an increase to the Borrowing Base Amount by the
amount of the overadvance); or (c) make the first of six (6) consecutive monthly
payments to the Bank, each in the amount equal to one-sixth of the overadvance.
ARTICLE VIII
SECURITY FOR THE INDEBTEDNESS
SECTION 8.1. SECURITY. The Indebtedness shall be secured by the
following:
(a) the Mortgage;
(b) The Pledge;
(c) the Guaranty; and
(d) Any additional Collateral Documents granted by any Person in favor
of Bank as security for the Indebtedness.
The Borrower understands and acknowledges that item (a) and (b) above
constitute a first priority mortgage lien and security interest affecting the
Mortgaged Properties and membership interest of PE-LA. In PEO in favor of the
Bank, subject only to Permitted Encumbrances.
ARTICLE IX
CONDITIONS PRECEDENT
SECTION 9.1. CONDITIONS PRECEDENT TO ALL REVOLVING LOANS. The
obligation of the Bank to make any Revolving Loan hereunder shall be subject to
the satisfaction and the continued satisfaction of the following conditions
precedent:
(a) The Borrower shall have executed and delivered to the Bank this
Agreement, the Revolving Note, the Mortgage, the Pledge, and all other documents
required by this Agreement, and the Guarantor shall have executed and delivered
to the Bank the Guaranty, all in form and substance and in such number of
counterparts as may be required by the Bank;
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(b) The representations, warranties, and covenants of the Borrower and
the Guarantor as set forth in this Agreement, or in any Related Document
furnished to the Bank in connection herewith, shall be and remain true and
correct;
(c) The Bank shall have received a favorable legal opinion of counsel
to the Borrower covering the transactions contemplated by this Agreement, in
form, scope and substance satisfactory to the Bank;
(d) The Bank shall have received certified resolutions of the Borrower
and Guarantor authorizing the execution of all documents and instruments
contemplated by this Agreement;
(e) The Bank shall have received all fees, charges and expenses which
are due and payable as specified in this Agreement and any Related Documents;
(f) No Default or Event of Default shall exist or shall result from the
making of a Loan or the issuance of a Letter of Credit;
(g) The Borrower and the Guarantor shall have provided the Bank with
all financial statements, reports and certificates required by this Agreement;
(h) The Bank shall have received the articles of incorporation and
bylaws, as amended, of PE-LA. and the Guarantor, the articles of organization
and operating agreement of PEO, as amended, and the Bank's counsel shall have
reviewed the foregoing documents and is satisfied with the validity, due
authorization and enforceability thereof and of all Related Documents;
(i) The Bank shall have received evidence acceptable to the Bank and
its counsel that its Encumbrances affecting the Collateral shall have a first
priority position, subject only to Permitted Encumbrances;
(j) The Borrower shall have complied with the procedure set forth in
this Agreement, for the making of a Revolving Loan;
(k) There shall have occurred no Material Adverse Change;
(l) The Bank's satisfactory review of (i) all environmental matters
related to the Mortgaged Properties and (ii) title to the Mortgaged Properties
and the value thereof.
(m) The Borrower must maintain insurance acceptable to the Bank, and
deliver to Bank evidence of such insurance coverages;
(n) The Borrower shall have executed and delivered to the Bank blank
form letters in lieu of division orders, in form and substance satisfactory to
the Bank;
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(o) The Bank shall have received from Compass an executed assignment of
the indebtedness of Borrower under the Compass Loan Agreement and the collateral
therefor, in form and substance satisfactory to Bank and its counsel.
(p) The Bank's satisfactory review of the loan and collateral documents
comprising the Bridge Facility;
(q) The Bank shall have received from EnCap an executed subordination
agreement affecting the Bridge Facility and the collateral therefor (the
"Subordination Agreement"), in form and substance satisfactory to Bank and its
counsel; and
(r) The Bank shall have received title opinions from counsel to
Borrower covering not less than eighty-five percent (85%) of the value of the
Mortgaged Properties, as determined by Bank, which opinions must be satisfactory
to the Bank and its counsel, and
The Bank reserves the right, in its sole discretion, to waive any one
or more of the foregoing conditions precedent.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
The Borrower and the Guarantor represent and warrant to the Bank as
follows:
SECTION 10.1. CORPORATE AUTHORITY. PE-LA. is a corporation duly
created, validly existing and in good standing under the laws of the state of
Louisiana, and is duly qualified and in good standing as a foreign corporation
in all jurisdictions where the failure to qualify would have an adverse effect
upon its ability to perform its obligations under this Agreement and all Related
Documents. PEO is a Louisiana limited liability company duly created, validly
existing, and in good standing under the laws of the state of Louisiana, and is
duly qualified and in good standing as foreign limited liability company in all
jurisdictions where the failure to qualify would have an adverse effect upon its
ability to perform its obligations under this Agreement and all Related
Documents to which it is a party. The Guarantor is a corporation duly created,
validly existing and in good standing under the laws of the state of Delaware,
and is duly qualified and in good standing as a foreign corporation in all
jurisdictions where the failure to qualify would have and adverse effect upon
its ability to perform its obligations under this Agreement and all Related
Documents to which it is a party. The Borrower has the power to enter into this
Agreement, issue the Note and Mortgage and grant the liens and security
interests in the Collateral in the manner and for the purpose contemplated by
the Collateral Documents. The Borrower has the power to perform its obligations
hereunder and under the Loan Documents and Related Documents. The making and
performance by the Borrower of the Loan Documents and Related Documents and the
making and performance by the Guarantor of the Loan Documents and Related Loan
Documents to which it is a party have all been duly authorized by all necessary
corporate or company action, and do not and will not violate any provision of
any law, rule, regulation, order, writ, judgment, decree, determination or award
presently in effect having
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applicability to the Borrower, the Guarantor, or the articles of incorporation
and bylaws of PE-LA. and Guarantor, or the articles of organization and
operating agreement of PEO. The making and performance by the Borrower and the
Guarantor of the Loan Documents and Related Documents to which each is a party
do not and will not result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement or instrument to
which the Borrower or Guarantor is a party or by which it may be bound or
affected, or result in, or require, the creation or imposition of any mortgage,
deed of trust, pledge, lien, security interest or other charge or encumbrance of
any nature (other than as contemplated by the Related Documents) upon or with
respect to any of the properties now owned or hereafter acquired by the Borrower
or Guarantor, and the Borrower and Guarantor are not in default under or in
violation of any such order, writ, judgment, decree, determination, award,
indenture, agreement or instrument. Each of the Loan Documents and Related
Documents to which the Borrower and/or Guarantor is a party constitutes a legal,
valid and binding obligations of, said party, the Borrower, enforceable in
accordance with its terms.
SECTION 10.2. FINANCIAL STATEMENTS. The balance sheet of the Borrower
and the Guarantor at the dates thereof, and the related statements of income and
retained earnings for the year then ended, copies of which have been delivered
to the Bank, are complete and correct and fairly present the financial condition
of such entities as of the date or dates thereof. Each of said financial
statements were prepared in conformity with GAAP applied on a basis consistent
with the preceding year. No Material Adverse Change has occurred since said
dates in the financial position or in the results of operations of the Borrower
and/or Guarantor in their businesses taken as a whole.
SECTION 10.3. TITLE TO MORTGAGED PROPERTIES. The Borrower has good and
marketable title to the Mortgaged Properties, free and clear of all Encumbrances
other than Permitted Encumbrances. The Collateral Documents constitute legal,
valid and perfected first Encumbrances on the property interests covered
thereby, subject only to Permitted Encumbrances.
SECTION 10.4. LITIGATION. Other than as has been disclosed previously
to the Bank in writing, there are no legal actions, suits or proceedings pending
or threatened against or affecting the Borrower, the Guarantor, or any of their
properties before any court or administrative agency (federal, state or local),
which, if determined adversely to any of the Borrower or the Guarantor would
constitute a Material Adverse Change to any of them, and there are no judgments
or decrees affecting the Borrower and/or the Guarantor, or their property
(including, without limitation, the Collateral) which are or may become an
Encumbrance against such property.
SECTION 10.5. APPROVALS. No authorization, consent, approval or formal
exemption of, nor any filing or registration with, any governmental body or
regulatory authority (federal, state or local), and no vote, consent or approval
of the shareholders or members of the Borrower or the Guarantor is or will be
required in connection with the execution and delivery by the Borrower and
Guarantor of the Related Documents or the performance by the Borrower and
Guarantor of their obligations hereunder and under the other Related Documents.
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SECTION 10.6. REQUIRED INSURANCE. The Borrower shall maintain insurance
with insurance companies in such amounts and against such risks as is usually
carried by owners of similar businesses and properties in the same general areas
in which Borrower operates, and as shall be reasonably satisfactory to the Bank.
The Borrower agrees to provide the Bank with certificates or binders evidencing
such insurance coverage on an annual basis. The Borrower further agrees to
promptly furnish the Bank with copies of all renewal notices and, if requested
by the Bank, with copies of receipts for paid premium. The Borrower shall
provide the Bank with certificates or binders evidencing insurance coverage
pursuant to all renewal or replacement policies of insurance no later than
fifteen (15) days before any such existing policy or policies should expire.
SECTION 10.7. LICENSES. The Borrower possesses adequate franchises,
licenses and permits to own its properties and to carry on its business as
presently conducted.
SECTION 10.8. ADVERSE AGREEMENTS. The Borrower and the Guarantor are
not parties to any agreement or instrument, nor subject to any charter or other
restriction, materially and adversely affecting the business, properties,
assets, or operations of the Borrower or the Guarantor or its/their condition
(financial or otherwise), and the Borrower and the Guarantor are not in default
in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement or instrument to which they
are a party, which default would constitute a Material Adverse Change.
SECTION 10.9. DEFAULT OR EVENT OF DEFAULT. No Default or Event of
Default hereunder has occurred or is continuing or will occur as a result of the
giving effect hereto.
SECTION 10.10. EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to
which the Borrower or Guarantor may have any liability complies in all material
respects with all applicable requirements of law and regulations, and (i) no
Reportable Event (as defined in ERISA) has occurred with respect to any such
plan, (ii) the Borrower and/or Guarantor has not withdrawn from any such plan or
initiated steps to do so, and (iii) no steps have been taken to terminate any
such plan.
SECTION 10.11. INVESTMENT COMPANY ACT. The Borrower is not an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
SECTION 10.12. PUBLIC UTILITY HOLDING COMPANY ACT. The Borrower is not
a "holding company," or a "subsidiary company" of a "holding company," within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
SECTION 10.13. REGULATIONS X, T AND U. The Borrower is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations X, T and U of the Board of Governors of the Federal
Reserve System), and none of the proceeds of the Loans will be used for the
purpose of purchasing or carrying such margin stock.
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SECTION 10.14. LOCATION OF OFFICES, RECORDS, EQUIPMENT AND INVENTORY.
The chief place of business of the Borrower, and the office where the Borrower
keeps all of its records concerning the Collateral, is 400 East Kaliste Saloom
Road, Suite 3000, Lafayette, LA 70508.
SECTION 10.15. INFORMATION. All information heretofore or
contemporaneously herewith furnished by the Borrower and the Guarantor to the
Bank for the purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all information hereafter furnished by or on behalf
of the Borrower and the Guarantor to the Bank will be, true and accurate in
every material respect on the date as of which such information is dated or
certified; and none of such information is or will be incomplete by omitting to
state any material fact necessary to make such information not misleading.
SECTION 10.16. ENVIRONMENTAL MATTERS. Except as previously disclosed to
Bank in writing or as could not reasonably be expected to result in a Material
Adverse Effect:
(a) Borrower is in compliance with all applicable Environmental Laws;
(b) Borrower has obtained all consents and permits required under all
applicable Environmental Laws to operate its business as presently conducted or
as proposed to be conducted and all such consents and permits are in full force
and effect and Borrower is in compliance with all terms and conditions of such
approvals;
(c) Neither Borrower nor any of the present property or operations of
Borrower is subject to any order from or agreement with any Governmental
Authority or private party respecting (i) failure to comply with any
Environmental Law or any Remedial Action or (ii) any Environmental Liabilities
arising from the Release or threatened Release except those orders and
agreements with which Borrower has complied;
(d) None of the operations of Borrower is subject to any judicial or
administrative proceeding alleging a violation of, or liability under, any
Environmental Law;
(e) None of the operations of Borrower, to its best knowledge after due
inquiry, is the subject of any investigation by any Governmental Authority
evaluating whether any Remedial Action is needed to respond to a Release or
threatened Release.
(f) Borrower has not been required to file any notice under any
Environmental Law indicating past or present treatment, storage or disposal of a
hazardous waste as defined by 40 CFR Part 261 or any state or local equivalent;
(g) Borrower has not been required to file any notice under any
applicable Environmental Law reporting a Release (other than minor or de minimis
Releases);
(h) There is not now, nor, to the best knowledge of Borrower, has there
ever been, on or in any property of Borrower:
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(i) any unauthorized generation, treatment, recycling,
storage or disposal of any hazardous waste as defined
by 40 CFR Part 261 or any state or local equivalent,
(ii) any underground storage tanks or surface impoundments
without proper permits,
(iii) any asbestos - containing material, or
(iv) any polychlorinated biphenyls (PCBs) used in
hydraulic oils, electrical transformers or other
equipment;
(i) There have been no written commitments or agreements involving
Borrower from or with any Governmental Authority or any private entity
(including, without limitation, the owner of the Mortgaged Properties or any
portion thereof) relating to the generation, storage, treatment, presence,
Release, or threatened Release on or into any of the properties of Borrower or
the environment (including off-site disposal of Hazardous Materials) or any
Remedial Action with respect thereto in non-compliance or violation of any
Environmental Law;
(j) Borrower has not received any written notice or claim to the effect
that it is or may be liable to any Person as a result of the Release or
threatened Release;
(k) Borrower has no known liability in connection with any material
Release or material threatened Release; and
(l) After due inquiry, no Environmental Lien has attached to any
properties of Borrower.
(m) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or which are in the possession of
Borrower in relation to any properties or facility now or previously owned or
leased by Borrower which have not been made available to Bank.
SECTION 10.17. SOLVENCY OF THE BORROWER AND THE GUARANTOR. The Borrower
and the Guarantor are, and after consummation of the transactions contemplated
by this Agreement (including the making of the Loans and the issuance of Letters
of Credit), and after giving effect to all obligations incurred by the Borrower
and the Guarantor in connection herewith, will be, Solvent.
SECTION 10.18. GOVERNMENTAL REQUIREMENTS. The Collateral is in
compliance with all current governmental requirements affecting the said
property.
SECTION 10.19. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Borrower
and the Guarantor understand and agree that the Bank is relying upon the above
representations and
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warranties in making the Loans to the Borrower. The Borrower and the Guarantor
further agree that the foregoing representations and warranties shall be
continuing in nature and shall remain in full force and effect until such time
as the Indebtedness shall be paid in full, or until this Agreement shall be
terminated, whichever is the last to occur.
ARTICLE XI
AFFIRMATIVE COVENANTS
In addition to the covenants contained in the Collateral Documents,
which covenants are hereby ratified and confirmed by the Borrower, the Borrower
and the Guarantor covenant and agree as follows:
SECTION 11.1. FINANCIAL STATEMENTS; OTHER REPORTING REQUIREMENTS. The
Guarantor and/or the Borrower, as the case may be will furnish or cause to be
furnished to the Bank:
(a) as soon as available and in any event within one hundred
twenty (120) days following the close of fiscal year of the
Guarantor, audited consolidated financial statements of the
Guarantor consisting of a balance sheet as at the end of such
fiscal year and statements of income, and statement of cash
flow for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the preceding
fiscal year, certified by independent certified public
accountants of recognized standing acceptable to the Bank,
(b) as soon as available and in any event within forty-five (45)
days following the close of each calendar quarter, interim
consolidated financial statements of the Guarantor, consisting
of a balance sheet as of the end of such quarter and
statements of income and cash flow, certified as true and
correct by the Guarantor's chief financial officer as having
been prepared in accordance with GAAP consistently applied,
(c) upon each submission of the financial statements required by
(a) and (b) above, a compliance certificate signed by the
chief financial officer of the Borrower in the form attached
hereto as Exhibit A, certifying that he has reviewed this
Agreement and to the best of his knowledge no Default or Event
of Default has occurred, or if such Default or Event of
Default has occurred, specifying the nature and extent
thereof, that all financial covenants in this Agreement have
been met, and providing a computation of all financial
covenants contained herein, and details of any waivers,
amendments, or modifications of any covenant contained in this
Agreement, and said certificate shall include a schedule of
all Hedging Agreements,
(d) upon Bank's request, a monthly aging of each the Borrower's
accounts receivable and accounts payable, in such form and
containing such representations and warranties regarding the
accounts as the Bank may reasonably require,
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(e) as soon as available and in any event within thirty (30) days
after filing, a copy of Guarantor's and each Borrower's tax
returns,
(f) by February 28th of each year, a third party engineering
report (at Borrower's expense) dated as of the preceding
December 31 covering the Mortgaged Properties, in form and
substance satisfactory to the Bank,
(g) as soon as available and in any event within forty five (45)
days after the end of each month, the following reports and
data: reports of production (attributable to the Mortgaged
Properties), commodity prices, sales revenues, operating
expenses for the Leases, production taxes, and capital
spending reports,
(h) as soon as available and in any event by August 31st of each
year, an internally prepared engineering report covering the
Mortgaged Properties and dated as of no earlier than the
preceding June 30, in form and content satisfactory to Bank,
and
(i) such other financial information or other information
concerning the Borrower and the Guarantor as the Bank may
reasonably request from time to time.
SECTION 11.2. NOTICE OF DEFAULT; LITIGATION; ERISA MATTERS. The
Borrower will give written notice to the Bank as soon as reasonably possible and
in no event more than five (5) Business Days of (i) the occurrence of any
Default or Event of Default hereunder of which it has knowledge, (ii) the filing
of any actions, suits or proceedings against the Borrower in any court or before
any governmental authority or tribunal of which they have knowledge, which could
cause a Material Adverse Change with respect to the Borrower and/or the
Guarantor, (iii) the occurrence of a reportable event under, or the institution
of steps by the Borrower to withdraw from, or the institution of any steps to
terminate, any employee benefit plan as to which the Borrower may have
liability, or (iv) the occurrence of any other action, event or condition of any
nature of which they have knowledge which may cause, or lead to, or result in,
any Material Adverse Change to the Borrower and/or the Guarantor.
SECTION 11.3. MAINTENANCE OF EXISTENCE, PROPERTIES AND LIENS. Except
for the anticipated reorganization of the Borrower in which (a) PE-LA. will be
merged into PEO, (b) PEO will be the survivor, (c) PEO will be the owner of all
Mortgaged Properties, and (d) the Guarantor will be the sole member of PEO,
which reorganization is subject to the Bank's prior written approval, the
Borrower and the Guarantor will (i) continue to engage in the business presently
being operated by each of them; (ii) maintain their existence and good standing
in each jurisdiction in which they are required to be qualified; (iii) keep and
maintain all franchises, licenses and properties necessary in the conduct of
their business in good order and condition; (iv) duly observe and conform to all
material requirements of any governmental authorities relative to the conduct of
their business or the operation of their properties or assets; and (v) the
Borrower will maintain in favor of the Bank a first perfected lien and security
interest in the Collateral, subject only to Permitted Encumbrances.
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SECTION 11.4. TAXES. Each of the Borrower and the Guarantor shall pay
or cause to be paid when due, all taxes, local and special assessments, and
governmental and other charges of every type and description, that may from time
to time be imposed, assessed and levied against it or its properties. The
Borrower and the Guarantor further agree to furnish the Bank with evidence that
such taxes, assessments, and governmental and other charges due by the Borrower
and the Guarantor have been paid in full and in a timely manner. The Borrower
and/or the Guarantor may withhold any such payment or elect to contest any lien
if the Borrower and/or the Guarantor are in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as the Bank's interest
in the Collateral is not jeopardized.
SECTION 11.5. PERFORMANCE OF LOAN DOCUMENTS. The Borrower and the
Guarantor shall duly and punctually pay and perform each of its obligations
under the Note, under this Agreement (as the same may at any time be amended or
modified and in effect) and under each of the Related Documents to which it is a
party, in accordance with the terms hereof and thereof.
SECTION 11.6 COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower shall
comply with and shall cause all of its employees, agents, invitees or sublessees
to comply with all Environmental Laws with respect to the disposal of Hazardous
Materials, and pay immediately when due the cost of removal of any such
Hazardous Materials from, and keep its properties free of any lien imposed
pursuant to any Environmental Laws.
The Borrower shall give notice to the Bank as soon as reasonably
possible and in no event more than five (5) days after it receives any
compliance orders, environmental citations, or other notices from any
Governmental Authority relating to any Environmental Liabilities relating to its
properties or elsewhere for which it may have legal responsibility with a full
description thereof; the Borrower agrees to take any and all reasonable steps,
and to perform any and all reasonable actions necessary or appropriate to
promptly comply with any such citations, compliance orders or Environmental Laws
requiring the Borrower to remove, treat or dispose of such Hazardous Materials
at the sole expense of the Borrower, to provide the Bank with satisfactory
evidence of such compliance; provided, however, that nothing contained herein
shall preclude the Borrower from contesting any such compliance orders or
citations if such contest is made in good faith, appropriate reserves are
established for the payment for the cost of compliance therewith, and the Bank's
security interest in any such property affected thereby (or the priority
thereof) is not jeopardized.
Regardless of whether any Event of Default hereunder shall have
occurred and be continuing, the Borrower (i) releases and waives any present or
future claims against the Bank for indemnity or contribution in the event the
Borrower becomes liable for any Environmental Lien and/or Remedial Action, and
(ii) agrees to defend, indemnify and hold harmless the Bank from any and all
liabilities (including strict liability), actions, demands, penalties, losses,
costs or expenses (including, without limitation, reasonable attorneys fees and
remedial costs), suits, administrative orders, agency demand letters, costs of
any settlement or judgment and claims of any and every kind whatsoever which may
now or in the future (whether before or after the termination of this Agreement)
be paid, incurred, or suffered by, or asserted against the Bank by any person or
entity or governmental agency for, with respect to, or as a direct or indirect
result of, the presence on or under, or the escape, seepage, leakage, spillage,
discharge, emission, or
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release from or onto the property of the Borrower of any Hazardous Materials,
regulated by any Environmental Laws, contamination resulting therefrom, or
arising out of, or resulting from, the environmental condition of such property
or the applicability of any Environmental Laws relating to hazardous materials
(including, without limitation, CERCLA or any so called federal, state or local
"super fund" or "super lien" laws, statute, ordinance, code, rule, regulation,
order or decree) regardless of whether or not caused by or within the control of
the Bank (the costs and/or liabilities described in (i) and (ii) above being
hereinafter referred to as the "Liabilities"). The covenants and indemnities
contained in this Section 9.6 shall survive termination of this Agreement.
SECTION 11.7. FURTHER ASSURANCES. The Borrower and the Guarantor will,
at any time and from time to time, execute and deliver such further instruments
and take such further action as may reasonably be requested by the Bank, in
order to cure any defects in the execution and delivery of, or to comply with or
accomplish the covenants and agreements contained in this Agreement or the
Collateral Documents. Borrower and Guarantor further agree to deliver, and to
cause any of its affiliates to deliver, as further security for the
Indebtedness, whenever requested by Bank in its sole discretion, such additional
collateral documents in form and substance satisfactory to Bank for the purpose
of granting, confirming, and perfecting first and prior liens or security
interests in any oil and gas properties and interests, together with all
associated equipment, production, production proceeds and other real or personal
property, hereafter owned or acquired by any Borrower or its affiliates, other
than properties owned or held by PetroQuest Oil & Gas, L.L.C., or granted as
collateral for the payment of the non-recourse indebtedness permitted by Section
12.5(c) hereof (and which is not previously covered by the Mortgage). Borrower
also agrees to deliver, whenever requested by Bank in its sole and absolute
discretion, favorable title opinions from legal counsel acceptable to Bank with
respect to any Borrower's properties and interests designated by Bank, based
upon abstract or record examinations to dates acceptable to Bank and (a) stating
that such Borrower has good and defensible title to such properties and
interests, free and clear of all liens other than Permitted Encumbrances, (b)
confirming that such properties and interests are subject to mortgages in favor
of Bank securing the Indebtedness that constitute and create legal, valid and
duly perfected first deed of trust or mortgage liens in such properties and
interests and first priority assignments of and security interests in the oil
and gas attributable to such properties and interests and the proceeds thereof,
and (c) covering such other matters as Bank may request, and further agrees to
perform such curative work as required by such opinions and as may reasonably be
requested by Bank.
SECTION 11.8. FINANCIAL COVENANTS. The Borrower and Guarantor shall
comply with the following covenants and ratios:
(a) MINIMUM CURRENT RATIO. The Guarantor shall at all times
maintain a minimum Current Ratio of 1.0 to 1.0. For the
purposes of this covenant, current accounts will not include
the effects, if any, of Hedging Agreements pursuant to SFAS
No. 133.
(b) MINIMUM TANGIBLE NET WORTH. The Guarantor shall at all times
maintain a minimum Tangible Net Worth of $35,000,000.00 plus
50% of the Guarantor's consolidated quarterly net income
reported after September 30, 2000.
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(c) MINIMUM DEBT SERVICE COVERAGE RATIO. The Guarantor shall
maintain at all times a debt service coverage ratio of not
less than 1.25 to 1.0. For the purposes of this covenant, the
effects, if any, of Hedging Agreements pursuant to SFAS No.
133 will not be included. Debt service coverage shall be
calculated based on GAAP as follows: the ratio of (i)
Guarantor's consolidated earnings before interest expense,
income taxes, depreciation, depletion, amortization, oil and
gas asset impairment write-downs, lease impairment expense,
uncapitalized discretionary exploration expenses, and gains
and losses from the sale of capital assets for the immediately
preceding three (3) months, divided by (ii) the sum of
Quarterly Reductions for the ensuing quarter being tested,
plus any other current maturities of long term debt forecast
for such quarter, plus interest expense for the immediately
preceding three (3) months, but excluding amounts due under
the Bridge Facility.
SECTION 11.9. OPERATIONS. The Borrower and the Guarantor shall conduct
their business affairs in a reasonable and prudent manner and in compliance with
all applicable federal, state and municipal laws, ordinances, rules and
regulations respecting their properties, charters, businesses and operations,
including compliance with all minimum funding standards and other requirements
of ERISA of 1974, and other laws applicable to any employee benefit plans which
they may have.
SECTION 11.10. CHANGE OF LOCATION. The Borrower shall, within ten (10)
Business Days prior to any such addition or change, notify the Bank in writing
of any proposed additions to or changes in the location of its business
location(s).
SECTION 11.11. EMPLOYEE BENEFIT PLANS. So long as this Agreement
remains in effect, the Borrower and the Guarantor will maintain each employee
benefit plan as to which they may have any liability, in compliance with all
applicable requirements of law and regulations
SECTION 11.12. DEPOSIT AND OPERATING ACCOUNTS. The Borrower will
maintain its primary operating and savings accounts with the Bank.
SECTION 11.13. PRODUCTION PROCEEDS. The Borrower will cause all
production proceeds and revenues attributable to the Mortgaged Properties to be
paid and deposited in the Borrower's accounts maintained with Bank, and shall
not redirect the payment of such proceeds to any other accounts.
SECTION 11.14. FIELD AUDITS; OTHER INFORMATION. The Borrower shall
allow the Bank's employees and agents access to its books and records and
properties during normal business hours to perform field audits from time to
time. The Borrower shall pay all reasonable costs and expenses associated with
such field audits. The Borrower will provide the Bank with such other
information as the Bank may reasonably request from time to time.
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SECTION 11.15. INSURANCE. The Borrower shall maintain in effect all
insurance required by this Agreement and the Collateral Documents, and the
Borrower agrees to comply with the requirements of Section 10.6. above.
SECTION 11.16. HEDGING AGREEMENTS. So long as there is outstanding
indebtedness of Borrower under Facility B, the Borrower and Guarantor agree to
maintain Hedging Agreements satisfactory to Bank covering not less than
one-third of the production from the Mortgaged Properties as projected in the
most recent third party independent engineering report covering Borrower's
proved developed producing reserves during the ensuing twelve (12) month period.
SECTION 11.17. POST-CLOSING TITLE OPINIONS. Within sixty (60) days from
the date of this Agreement, the Borrower shall cause its counsel to provide to
the Bank, title opinions covering the interest of the Borrower (or either of
them) in the following wells and prospects: Valentine Plantation No. 1, Location
B (Turtle Bayou Field), Valentine No. 14, CL & F No. 14 (the Krumbaar Sand),
OCS-G-00057 No. 10, CL & F No. 6ST, and Southcoast No. 9, in form and substance
satisfactory to the Bank and its counsel. In addition, Borrower shall deliver to
Bank title opinions covering the Ship Shoal Interests upon Borrower's
acquisition thereof, in form and substance satisfactory to Bank and its counsel.
Further, if required by Bank and its counsel, Borrower agrees that it shall
execute any necessary supplement to the Mortgage to encumber any of the
Borrower's interests affected by the required post-closing title opinions. The
Borrower's failure to comply with this covenant and/or the delivery of one or
more title opinions pursuant to this covenant that are unacceptable to the Bank
and its counsel, shall cause an immediate redetermination of the Borrowing Base
Amount by Bank in its sole discretion. This redetermination will be in addition
to all other redetermination rights of Bank set forth in this Agreement.
SECTION 11.18. SHIP SHOAL INTERESTS. On or before December 29, 2000,
the Borrower shall have closed the Bridge Facility and acquired the Ship Shoal
Interests. In the event the Borrower does not timely close the Bridge Facility
and acquire the Ship Shoal Interests, the Bank shall be entitled to immediately
redetermine the Borrowing Base Amount. This redetermination will be in addition
to all other redetermination rights of Bank set forth in this Agreement.
SECTION 11.19. POST-CLOSING OPINION BY BORROWER'S COUNSEL. Within
thirty-one (31) days from the date of this Agreement, Borrower shall cause its
counsel to issue an opinion letter to Bank confirming that the Mortgage (and all
related financing statements) have been properly filed and recorded, which
opinion letter must be acceptable to Bank and its counsel.
SECTION 11.20. NOTICE OF ISSUANCE OF ANY PERMITTED JUNIOR SECURITIES.
Borrower agrees to give Bank written notice prior to either Borrower's issuance
of Permitted Junior Securities (as defined in the Subordination Agreement) to
EnCap or any of its affiliates.
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ARTICLE XII
NEGATIVE COVENANTS
In addition to the negative covenants contained in the Collateral
Documents, which covenants are hereby ratified and confirmed by the Borrower and
the Guarantor, as the case may be, the Borrower and the Guarantor covenant and
agree as follows:
SECTION 12.1. LIMITATIONS ON FUNDAMENTAL CHANGES. Except for the
anticipated reorganization of the Borrower in which (a) PE-LA. will be merged
into PEO, (b) PEO will be the survivor, (c) PEO will be the owner of all
Mortgaged Properties, and (d) the Guarantor will be the sole member of PEO,
which reorganization is subject to the Bank's prior written approval, the
Borrower and the Guarantor shall not change the nature of their business, grant
credit terms to its customers on terms different than those presently granted to
customers, or form any Subsidiary without the prior written consent of the Bank,
nor shall the Borrower or Guarantor enter into any transaction of merger or
consolidation, or liquidate or dissolve itself (or suffer any liquidation or
dissolution). Notwithstanding the foregoing, Bank acknowledges that the
Guarantor recently formed PetroQuest Oil & Gas, L.L.C., a Louisiana limited
liability company, as a Subsidiary.
SECTION 12.2. DISPOSITION OF ASSETS. The Borrower shall not convey,
sell, lease, assign, transfer or otherwise dispose of, any of its property or
assets (whether now owned or hereafter acquired) outside of the ordinary course
of business in excess of $500,000.00 in the aggregate between any two scheduled
semi-annual Borrowing Base Amount redeterminations.
SECTION 12.3. REPURCHASE OF CAPITAL STOCK; RESTRICTED PAYMENTS. The
Borrower shall not (i) repurchase or redeem any of membership interest and/or
capital stock or (ii) declare or pay (or set aside reserves for payment of) any
dividends or distributions, in excess of 50% of Guarantor's consolidated net
income during the most recent fiscal quarter, without the prior written consent
of the Bank.
SECTION 12.4. ENCUMBRANCES. The Borrower shall not create, incur,
assume or permit to exist any Encumbrances on any of its property now owned or
hereafter acquired, except for the following (hereinafter referred to as the
"Permitted Encumbrances"):
(a) Encumbrances for taxes, assessments, or other governmental
charges not yet due or which are being contested in good faith
by appropriate action promptly initiated and diligently
conducted, if such reserves as shall be required by GAAP shall
have been made therefor;
(b) Encumbrances of landlords, vendors, carriers, warehousemen,
mechanics, laborers and materialmen arising by law in the
ordinary course of business for sums either not yet due or
being contested in good faith by appropriate action promptly
initiated and diligently conducted, if such reserve as shall
be required by GAAP shall have been made therefor;
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(c) Inchoate liens arising under ERISA to secure the contingent
liabilities, if any, permitted by this Agreement;
(d) The Collateral Documents and any other Encumbrances in favor
of the Bank to secure the Indebtedness of the Borrower to the
Bank;
(e) Encumbrances in favor of EnCap, provided such Encumbrances are
subordinated in favor of Bank pursuant to the Subordination
Agreement;
(f) Encumbrances granted prior to the date of this Agreement to
secure non-recourse Debt, and/or Encumbrances granted after
the date of this Agreement to secure non-recourse Debt;
(g) Encumbrances existing as of the date of this Agreement in
favor of Hibernia Corporation and/or Hibernia Energy
Investment Corporation; and
(h) Encumbrance evidenced by that certain UCC-1 financing
statement by PEO in favor of Linc Monex, recorded with the
Secretary of State of Texas under No. 98-215813.
SECTION 12.5. DEBTS, GUARANTIES AND OTHER OBLIGATIONS. The Borrower
will not incur, create, assume or in any manner become or be liable in respect
of any indebtedness, guaranties, and/or other obligations, direct or contingent,
except for:
(a) The Indebtedness to the Bank under this Agreement;
(b) Trade payables or operating and facility leases from time to
time incurred in the ordinary course of business;
(c) Non-recourse obligations or indebtedness not to exceed
$25,000,000.00 at any time outstanding;
(d) Taxes, assessments or other government charges which are not
yet due or are being contested in good faith by appropriate
action promptly initiated and diligently conducted, if such
reserve as shall be required by generally accepted accounting
principles shall have been made therefore;
(e) The Bridge Facility;
(f) The outstanding indebtedness (as of the date of this
Agreement) owed to Hibernia Corporation and/or Hibernia Energy
Investment Corporation; or
(g) Existing debt (as of the date of this Agreement) of PEO to
Linc Monex.
SECTION 12.6. INVESTMENTS, LOANS AND ADVANCES. The Borrower will not
make or permit to remain outstanding any loans or advances to or investments in
any Person, except for:
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(a) Investments in direct obligations of the United States of
America or any agency thereof; or
(b) Investments in certificates of deposit issued by national
banks.
SECTION 12.7. OTHER AGREEMENTS. The Borrower and the Guarantor will not
enter into any agreement containing any provision which would be violated or
breached by the performance of its obligations hereunder or under any instrument
or document delivered or to be delivered by any of them hereunder or in
connection herewith.
SECTION 12.8. TRANSACTIONS WITH AFFILIATES. The Borrower and the
Guarantor will not enter into any agreement with any affiliate except to the
extent that such agreements are commercially reasonable which provide for terms
which would normally be obtainable in an arm's length transaction with an
unrelated third party.
SECTION 12.9. USE OF REVOLVING LOAN PROCEEDS. The Borrower shall not
use any Revolving Loan proceeds to finance investments in marketable securities.
SECTION 12.10. COMMODITY TRANSACTIONS. The Borrower shall not enter
into any speculative commodity transactions of any type or Hedging Agreement
relating to the sale of aggregate Hydrocarbons production in excess of
seventy-five percent (75%) of the total volume of such production projected in
the most recent independent engineering report delivered to Bank pursuant to
Section 11.1(f) or as projected in the most recent internally prepared
engineering report delivered to Bank pursuant to Section11.1(h), whichever is
more recent, to come from the Borrower's proved developed producing reserves
during the term of such Hedging Agreement. Notwithstanding the foregoing, the
maximum duration of any permitted Hedging Agreement shall not exceed twenty-four
(24) months. In addition, if Borrower desires to enter into Hedging Agreements
affecting new wells, Borrower agrees to obtain Bank's prior written consent to
such Hedging Agreements.
ARTICLE XIII
EVENTS OF DEFAULT
SECTION 13.1. EVENTS OF DEFAULT. The occurrence of any one or more of
the following shall constitute an Event of Default:
DEFAULT UNDER THE INDEBTEDNESS. Should the Borrower default in the
payment of principal or interest under the Indebtedness of the Borrower, or
should the Borrower default in the payment of interest under the Indebtedness of
the Borrower within ten (10) days after any such interest payment is due.
DEFAULT UNDER THIS AGREEMENT. Should the Borrower or the Guarantor
violate or fail to comply fully with any of the terms and conditions of, or
default under, this Agreement, and such default not be cured within thirty (30)
days of the occurrence thereof (provided, however, that no
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cure period shall be available for a default in the obligation to maintain
insurance coverages required hereby).
DEFAULT UNDER OTHER AGREEMENTS. Should any event of default occur or
exist under any of the Related Documents or should the Borrower or the Guarantor
violate, or fail to comply fully with, any terms and conditions of any of the
Collateral Documents or Related Documents, and such default not be cured within
ten days of the occurrence thereof.
OTHER DEFAULTS IN FAVOR OF THE BANK. Should the Borrower default under
any other loan, extension of credit, security agreement, or other obligation in
favor of the Bank and fail to cure same in accordance with any applicable cure
periods.
DEFAULT IN FAVOR OF THIRD PARTIES (INCLUDING ENCAP). Should the
Borrower or the Guarantor default under any loan, extension of credit, security
agreement, purchase or sales agreement, or any other agreement, in favor of any
other creditor or person (including, without limitation, EnCap) and fail to cure
same in accordance with any applicable cure periods.
INSOLVENCY. The following occurrences, in addition to the failure or
suspension of either the Borrower or the Guarantor, shall constitute an Event of
Default hereunder:
(a) Filing by the Borrower or Guarantor of a voluntary petition or
any answer seeking reorganization, arrangement, readjustment
of its debts or for any other relief under any applicable
bankruptcy act or law, or under any other insolvency act or
law, now or hereafter existing, or any action by the Borrower
or Guarantor consenting to, approving of, or acquiescing in,
any such petition or proceeding; the application by the
Borrower or Guarantor for, or the appointment by consent or
acquiescence of, a receiver or trustee of the Borrower or
Guarantor for all or a substantial part of the property of any
such Person; the making by the Borrower or Guarantor, of an
assignment for the benefit of creditors; the inability of the
Borrower or Guarantor or the admission by the Borrower or
Guarantor in writing, of its inability to pay its debts as
they mature (the term "acquiescence" means the failure to file
a petition or motion in opposition to such petition or
proceeding or to vacate or discharge any order, judgment or
decree providing for such appointment within sixty (60) days
after the appointment of a receiver or trustee); or
(b) Filing of an involuntary petition against the Borrower or
Guarantor in bankruptcy or seeking reorganization,
arrangement, readjustment of its debts or for any other relief
under any applicable bankruptcy act or law, or under any other
insolvency act or law, now or hereafter existing and such
petition remains undismissed or unanswered for a period of
sixty (60) days from such filing; or the insolvency
appointment of a receiver or trustee of the Borrower or
Guarantor for all or a substantial part of the property of
such Person and such appointment remains unvacated or
unopposed for a period of sixty (60) days from such
appointment, execution or similar process against any
substantial part of the property of the
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Borrower or Guarantor and such warrant remains unbonded or
undismissed for a period of sixty (60) days from notice to the
Borrower or Guarantor of its issuance.
DISSOLUTION PROCEEDINGS. Should proceedings for the dissolution or
appointment of a liquidator of the Borrower or Guarantor be commenced.
FALSE STATEMENTS. Should any representation or warranty of either the
Borrower or the Guarantor made in connection with the Indebtedness prove to be
incorrect or misleading in any material respect when made or reaffirmed.
MATERIAL ADVERSE CHANGE. Should a Material Adverse Change with respect
to either the Borrower or the Guarantor occur at any time and not be cured
within ten days of the occurrence thereof.
Upon the occurrence of an Event of Default, the Revolving Loan
Commitment will, at the option of Bank, either terminate or be suspended
(including any obligation to make any further Revolving Loans), and, at the
Bank's option, the Revolving Note and all Indebtedness of the Borrower will
become immediately due and payable, all without notice of any kind to the
Borrower or the Guarantor, except that in the case of type described in the
"Insolvency" subsection above, such acceleration shall be automatic and not
optional.
Upon the occurrence of an Event of Default, the Bank may proceed to
realize upon the Collateral under the terms of the Collateral Documents and
exercise any other rights which it has by law or contract (which rights shall be
cumulative in nature).
SECTION 13.2. WAIVERS. Except as otherwise provided for in this
Agreement and by applicable law, the Borrower and the Guarantor waive (i)
presentment, demand and protest and notice of presentment, dishonor, notice of
intent to accelerate, notice of acceleration, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guaranties at any time held by the Bank on which the Borrower or the
Guarantor may in any way be liable and hereby ratify and confirm whatever the
Bank may do in this regard, (ii) all rights to notice and a hearing prior to the
Bank's taking possession or control of, or to the Bank's replevy, attachment or
levy upon, the Collateral or any bond or security which might be required by any
court prior to allowing the Bank to exercise any of its remedies, and (iii) the
benefit of all valuation, appraisal and exemption laws. The Borrower and the
Guarantor acknowledge that they have been advised by counsel of their choice
with respect to this Agreement, the other Collateral Documents, and the
transactions evidenced by this Agreement and other Collateral Documents.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1. NO WAIVER; MODIFICATION IN WRITING. No failure or delay
on the part of the Bank in exercising any right, power or remedy hereunder shall
operate as a waiver thereof,
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nor shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy hereunder. No amendment, modification or waiver of any
provision of this Agreement or of the Note, nor consent to any departure by the
Borrower or the Guarantor therefrom, shall in any event be effective unless the
same shall be in writing signed by or on behalf of the Bank and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on the Borrower or the Guarantor
in any case shall entitle the Borrower or the Guarantor to any other or further
notice or demand in similar or other circumstances.
SECTION 14.2. ADDRESSES FOR NOTICES. All notices and communications
provided for hereunder shall be in writing and, shall be mailed, by certified
mail, return receipt requested, or delivered as set forth below unless any
person named below shall notify the others in writing of another address, in
which case notices and communications shall be mailed, by certified mail, return
receipt requested, or delivered to such other address.
If to the Bank:
Hibernia National Bank
213 West Vermilion Street
Lafayette, LA 70502
Attn: Mr. David Reid
If to the Borrower:
PetroQuest Energy One, Inc.
PetroQuest Energy, Inc.
400 East Kaliste Saloom Road.
Suite 3000
Lafayette, LA 70508
Attn: Chief Financial Officer
If to Guarantor:
PetroQuest Energy, Inc.
400 East Kaliste Saloom Road
Suite 3000
Lafayette, LA 70508
Attn: Chief Financial Officer
SECTION 14.3. FEES AND EXPENSES. The Borrower agrees to pay all fees,
costs and expenses of the Bank in connection with the preparation, execution and
delivery of this Agreement, and all Related Documents to be executed in
connection herewith and subsequent modifications or amendments to any of the
foregoing, including without limitation, the
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reasonable fees and disbursements of counsel to the Bank, and to pay all costs
and expenses of the Bank in connection with the enforcement of this Agreement,
the Revolving Note or the other Related Documents, including reasonable legal
fees and disbursements arising in connection therewith. The Borrower also agrees
to pay, and to save the Bank harmless from any delay in paying stamp and other
similar taxes, if any, which may be payable or determined to be payable in
connection with the execution and delivery of this Agreement, the Revolving
Note, the other Related Documents, or any modification thereof.
SECTION 14.4. SECURITY INTEREST AND RIGHT OF SET-OFF. The Bank shall
have a continuing security interest in, as well as the right to set-off the
obligations of the Borrower hereunder against, all funds which the Borrower may
maintain on deposit with the Bank (with the exception of funds deposited in the
Borrower's accounts in trust for third parties or funds deposited in pension
accounts, IRA's, Keogh accounts and All Saver Certificates), and the Bank shall
have a lien upon and a security interest in all property of the Borrower in the
Bank's possession or control which shall secure the Indebtedness of the
Borrower.
SECTION 14.5. WAIVER OF MARSHALING. The Borrower and the Guarantor
shall not at any time hereafter assert any right under any law pertaining to
marshaling (whether of assets or liens) and the Borrower and the Guarantor
expressly agree that the Bank may execute or foreclose upon the Collateral in
such order and manner as the Bank, in its sole discretion, deems appropriate.
SECTION 14.6. GOVERNING LAW. This Agreement and the Revolving Note
shall be deemed to be contracts made under the laws of the State of Louisiana
and for all purposes shall be construed in accordance with the laws of said
State.
SECTION 14.7. CONSENT TO LOAN PARTICIPATION. The Borrower and the
Guarantor agree and consent to the Bank's sale or transfer, whether now or
later, of one or more participation interests in the Indebtedness of the
Borrower arising pursuant to this Agreement to one or more purchasers, whether
related or unrelated to the Bank. The Bank may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge the Bank may have about the Borrower and the Guarantor
or about any other matter relating to such Indebtedness, and the Borrower and
the Guarantor hereby waive any rights to privacy they may have with respect to
such matters. The Borrower and the Guarantor also agree that the purchasers of
any such participation interest will be considered as the absolute owners of
such interests in such Indebtedness.
SECTION 14.8. CONSENT TO SYNDICATION. The Borrower and the Guarantor
understand and acknowledge that Bank intends to syndicate the Loans to one or
more lending institutions. The Borrower and the Guarantor consent to Bank's
distribution to interested lending institutions of all financial information and
other data in Bank's possession concerning Borrower and/or Guarantor, including
data prepared by or for Borrower and/or Guarantor, so that the interested
lending institution(s) may evaluate the Loans and the Collateral. The Bank will
provide notice to the Borrower of the lending institutions that are distributed
financial data by Bank concerning Borrower and/or Guarantor. The Borrower and
the Guarantor agree to enter into an amendment of this Agreement and any of the
Related Documents in order to facilitate such syndication. Further, to the
extent necessary or desirable by Bank, the Borrower and the Guarantor agree and
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understand that the Collateral Documents may be in favor of the "Bank as Agent"
in order to accomplish such syndication.
SECTION 14.9. WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION. (a) THE
BORROWER, THE GUARANTOR, AND THE BANK HEREBY WAIVE TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO WHICH THE BORROWER, THE GUARANTOR, AND THE BANK MAY BE PARTIES,
ARISING OUT OF OR IN ANY WAY PERTAINING TO (i) THE REVOLVING NOTE, (ii) THIS
AGREEMENT, (iii) THE COLLATERAL DOCUMENTS OR (iv) THE COLLATERAL. IT IS AGREED
AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL
CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS
AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS WAIVER IS KNOWINGLY,
WILLINGLY AND VOLUNTARILY MADE BY THE BORROWER, THE GUARANTOR, AND THE BANK, AND
THE BORROWER, THE GUARANTOR, AND THE BANK HEREBY REPRESENT THAT NO
REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE
BORROWER, THE GUARANTOR, AND THE BANK EACH FURTHER REPRESENT THAT IT HAS BEEN
REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD
THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
(b) THE BORROWER AND THE GUARANTOR HEREBY IRREVOCABLY CONSENT TO THE
JURISDICTION OF THE STATE COURTS OF LOUISIANA AND THE FEDERAL COURTS IN
LOUISIANA AND AGREE THAT ANY ACTION OR PROCEEDING ARISING OUT OF OR BROUGHT TO
ENFORCE THE PROVISIONS OF THE NOTE, THIS AGREEMENT AND/OR THE COLLATERAL
DOCUMENTS MAY BE BROUGHT IN ANY COURT HAVING SUBJECT MATTER JURISDICTION.
SECTION 14.10. SEVERABILITY. If a court of competent jurisdiction finds
any provision of this Agreement to be invalid or unenforceable as to any person
or circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any such
offending provision shall be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this Agreement in all
other respects shall remain valid and enforceable.
SECTION 14.11. HEADINGS. Article and Section headings used in this
Agreement are for convenience only and shall not affect the construction of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
PETROQUEST ENERGY ONE, L.L.C.,
A LOUISIANA LIMITED LIABILITY COMPANY
By: PetroQuest Energy, Inc.,
a Louisiana corporation, as sole member
By: /s/ Charles T. Goodson
--------------------------------------------
Name: Charles T. Goodson
Title: Chairman of the Board and Chief
Executive Officer
PETROQUEST ENERGY, INC.,
A LOUISIANA CORPORATION
By: /s/ Charles T. Goodson
--------------------------------------------
Name: Charles T. Goodson
Title: Chairman of the Board and Chief
Executive Officer
GUARANTOR:
PETROQUEST ENERGY, INC.
A DELAWARE CORPORATION
By: /s/ Charles T. Goodson
--------------------------------------------
Name: Charles T. Goodson
Title: Chairman of the Board and Chief
Executive Officer
BANK:
HIBERNIA NATIONAL BANK
By: /s/ David R. Reid
---------------------------------------------
Name: David R. Reid
Title: Senior Vice President
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